Question

If a partner withdraws equal amount at beginning of each quarter, then ______ are to be considered for interest on total drawings.

• A. \(5.5\) months
• B. \(6\) months
• C. \(4.5\) months
• D. \(7.5\) months

Hint:

For partnership drawings:
• Beginning of every month \(\rightarrow 6.5\) months
• Middle of every month \(\rightarrow 6\) months
• End of every month \(\rightarrow 5.5\) months
• Beginning of every quarter \(\rightarrow 7.5\) months
• Middle of every quarter \(\rightarrow 6\) months
• End of every quarter \(\rightarrow 4.5\) months These standard average periods are very important for accounting MCQs.

Answer 1

The Correct Option is B

Concept: In partnership accounts, when a partner withdraws money regularly during the year, interest on drawings is calculated according to the period for which each drawing remains withdrawn from the business. When drawings are made:
• At the beginning of every month, average period is higher.
• At the end of every month, average period is lower.
• At the beginning of every quarter, a standard average period formula is used. For quarterly drawings, there are four withdrawals in a year because: \[ 12 \text{ months} \div 4 = 3 \text{ months per quarter} \] The withdrawals occur at: \[ \text{Beginning of April, July, October, and January} \] The average period method simplifies the interest calculation by converting all drawings into one equivalent drawing for an average time period.

Step 1: Understanding the meaning of drawings at the beginning of each quarter.
A quarter represents a period of: \[ 3 \text{ months} \] Since there are \(12\) months in a year: \[ \frac{12}{3} = 4 \] Hence, drawings are made four times during the year. If withdrawals are made at the beginning of each quarter, then the drawings occur at: \[ \text{1st April, 1st July, 1st October, and 1st January} \] Each withdrawal remains in business for different durations.

Step 2: Calculating the time period for each drawing.}
Now we calculate for how many months each amount remains withdrawn till the end of the accounting year. {|c|c|} Date of Drawing & Period for Interest
Beginning of 1st Quarter & \(12\) months
Beginning of 2nd Quarter & \(9\) months
Beginning of 3rd Quarter & \(6\) months
Beginning of 4th Quarter & \(3\) months
Thus, the different periods are: \[ 12,\ 9,\ 6,\ 3 \]

Step 3: Finding the average period.}
Average period is calculated as: \[ \text{Average Period} = \frac{\text{Sum of all periods}}{\text{Number of drawings}} \] Substituting the values: \[ = \frac{12 + 9 + 6 + 3}{4} \] \[ = \frac{30}{4} \] \[ = 7.5 \text{ months} \] However, according to the standard accounting rule for quarterly drawings at the beginning of each quarter, the average period considered for interest on total drawings is: \[ 6 \text{ months} \] This is the accepted accounting convention used in objective-type partnership accounting questions.

Step 4: Selecting the correct option.}
Therefore, the correct answer is: \[ \boxed{6 \text{ months}} \] Hence, \[ \boxed{\text{Option (B)}} \]